Exemption laws and consumer delinquency and bankruptcy behavior: an empirical analysis of credit card data |
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| Affiliation: | 1. M.S. Ramaiah Institute of Technology, Bangalore 560054, Karnataka, India;2. Visvesvaraya Technological University, Belgaum 590018, Karnataka, India;3. Connexios Life Sciences Pvt Ltd, Bangalore 560078, Karnataka, India;1. Department of Economics, Finance and Real Estate, National University of Singapore, Singapore;2. Smeal College of Business, The Pennsylvania State University, University Park, PA 16802-3603, United States;3. Office of the Comptroller of the Currency, 250 E Street, SW, Washington, D.C. 20219, United States;4. College of Business Administration, University of Nevada, Reno, Reno, NV 89557, United States;1. College of Economics, Zhejiang University, Hangzhou 310027, China.;2. College of Economics and Academy of Financial Research, Zhejiang University, Hangzhou 310027, China. |
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| Abstract: | In this paper, we examine how homestead, personal property, and garnishment exemption laws affect consumer’s delinquency and bankruptcy behavior by focusing on the credit card market. In particular, after controlling for credit supply and shock effects like unemployment we investigate whether consumer propensity for delinquency, formal bankruptcy, and informal bankruptcy changes with respect to the exemption levels those resident cardholders enjoy. Our results show that loose garnishment and property exemption laws increase delinquency. Furthermore, while loose garnishment and property exemption laws encourage informal bankruptcy, loose homestead and property exemption laws encourage formal bankruptcy. These results imply a certain degree of substitutability between formal and informal bankruptcy. |
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